Banks to flag cash transactions exceeding RM25k starting 2019

Persistency of cash among the public and SMEs remains high, says BNM governor Nor Shamsiah


Bank Negara Malaysia (BNM) will be lowering the daily cash threshold report (CTR) to RM25,000 effective Jan 1, 2019, from the current RM50,000, a move that is expected to reduce financial crime.

BNM governor Datuk Nor Shamsiah Mohd Yunus (picture) said in her keynote address at the 10th International Conference on Financial Crime and Terrorism Financing (IFCTF 2018) in Kuala Lumpur yesterday that the decision will also bring the CTR in Malaysia more at par with other countries.

“It is timely for us to look at ways to strengthen the controls to mitigate financial crime; namely the cash threshold reporting requirement.

“When we compare Malaysia toother countries, our current threshold is too high and disconnected from the size of our economy, especially relative to our purchasing power. Hence, it needs to be updated.

“We do not anticipate any impact in terms of economic activity, but an increase in effectiveness in taming the black economy that is still heavily reliant on cash transactions,” she said.

Nor Shamsiah noted that demand for cash worldwide continues to rise, despite the emergence of technologies that have given rise to mobile banking, electronic payments (e-payments) and virtual assets.

For Malaysia, its currency in circulation has increased by around 150% over the past decade, although it is relatively stable when scaled to the country’s GDP, ranging between 6.1% and 6.9% over the past five years.

“Thus, despite the headway we have made in advancing e-payments, the persistency of cash among the public and small and medium enterprises (SMEs) remains high.

“This opens up the economy to risks as cash is still being used by criminals to launder illegal proceeds, as we have seen from some high-profile cases over the past year or so. Similarly, this is the preferred mode to finance terrorist activities, which involve transacting in cash,” No Shamsiah stated.

Domestic mobile banking transactions have multiplied from around 500 million transactions in 2016 to nearly 1.3 trillion transactions in August this year, the governor added.

Another area of growth comes from virtual assets, with the market capitalisation of virtual assets having grown over 1,000% from around US$20 billion (RM83.64 billion) as at end-2016 to around US$200 billion to date.

According to current data from BNM’s website, CTR refers to cash transactions exceeding RM50,000 involving physical currencies —domestic or foreign — and bearer negotiable instruments such as travellers’ cheques, but excludes bank drafts, cheques, electronic transfers or fixed deposit rollovers or renewals.

These include transactions involving withdrawal of cash from accounts or exchange of bearer negotiable instruments for cash.

The requirements for CTR are applicable to single or multiple cash transactions within the same amount specified in a day, while in cases involving deposits and withdrawals, the amount must be aggregated.

Section 4A of the Anti-Money Laundering Act (AMLA) also includes the offence of splitting transactions into separate amounts to avoid CTR transaction reporting requirements under the AMLA.

Compliance Officers’ Networking Group chairman V Maslamani said the reduced CTR would likely result in a slight increase in compliance costs for banks, although this would be “very minimal”.

“The lower CTR will create more frontline work for banks, as they would need more details on transactions. It would also be more resource-intensive for BNM, as the job of analysing the data will be more difficult.

“But most banks have already automated the data capturing process anyway, and higher compliance is always good for business as it improves your reputation, plus the cost of not doing compliance is much higher than the cost of compliance,” he told reporters at IFCTF 2018 yesterday.

In line with Nor Shamsiah’s observation of Malaysia’s CTR being too disconnected from the economy, Maslamani added that the current threshold of RM50,000 is high, given that in the US — a far larger economy — the daily cash threshold stands at US$10,000 (approximately RM41,800).

He also said the BNM had already engaged with several key banking institutions to gather feedback on potential challenges following the 50% reduction in the CTR.

“Except dealing with public perception on giving additional details to banks, I don’t think banks will have much of an issue in implementing this requirement,” he stated.